By Frank J. Diekmann
Let’s talk about the other great “digital divide” in credit unions, as it has great bearing on the future of at least half of the movement.
You already know about the much-discussed digital divide in the credit union community between the haves and have-nots when it comes to the ability to invest in and electronically deliver services to members in a way that is on par with the how the big name brand retailers do it.
The related digital divide, of course, is the digits on the spread sheet every quarter in the capital and the net income departments. This is, frankly, where most small and midsize CU leaders are focused, especially the digits representing the net worth ratio, where the fire hydrant of inflowing deposits has many worried about keeping their heads above the PCA waters.
That necessary focus on the day-to-day demands by many small and mid-size CU CEOs and C-suiters brings us to the other digital divide which is often overlooked but every bit as critical to a CU’s future: the digits on the clock. It’s those digits that prevent many from being able to give much thought to the year-to-year, the longer-term picture of where the credit union is headed and how it’s going to get there. When you’re in the putting-out-fires business there just aren’t enough hours in the day, as they say, to be thinking much about fireproofing the future.
I found myself thinking about this last week, fittingly enough, during a virtual THINK session hosted by CO-OP Financial Services, coverage of which can be found here. And what I was thinking was how so many CU leaders who needed to be hearing the message, weren’t. You know, the fire thing.
The (Way) Wrong Focus
The gist of the discussion: Most credit unions tend to really focus on the “products and services” they deliver members. Indeed, many boast about their “products and services” on their websites and in promotional materials, which has always confounded me as I’ve never heard a single person ever actually say they are in the market for “products and services.” But what is it that members don’t want, according to a large survey conducted by EY and CO-OP of 3,000 members and non-members? You can probably guess where I’m going here: they don’t want products and services.
Instead, they want their credit union to demonstrate the ability to not just meet their needs but anticipate those needs—and do so quickly, ideally before members even know what they need. Driving consumer desires today are concepts such as “fluidity” and “curated value.” And if you’re thinking that sounds like consultant talk or the kind of high-level hoo-hah you read in some academic’s business book du jour, think again: it’s precisely the kind of concepts the fintechs have provided that have attracted tens of millions of users (many of them CU members). You can find details on what all that means via the link above.
Reaching For The Phone
During the THINK presentation CO-OP CEO Todd Clark offered a great illustration of that latter point.
“The other thing is when I can’t go to the credit union to solve my problem, where do I go? I go to my phone. I type into my phone, ‘How do I solve this problem?’ It brings you an app like SoFi or PayPal or Chime. These solutions are being provided to your members. It’s the fintechs’ plan to slowly strip off these pieces of your business.”
So, if you’re a small or midsize credit union without the resources of a larger CU to have a full-time exec who’s only job is strategic planning and visioning, how do you solve your problem? Might I suggest you also look to your phone and set an alarm or reminder to divide up the digits on your calendar to find just an hour a week to bring together the management team, whatever its size, to just think about and brainstorm over the longer-term picture and cultural and marketplace changes taking place. Meeting rule number one: no mention of products and services.
The good news in credit unions? There are so many free resources available, research to be tapped, people who will share their insights, and more. The bad news? So much of that goes untapped.
The CO-OP THINK webinar was an excellent example. It offered troves of data and findings from the EY research, all there for the taking (and more importantly, the applying!)
Three Calls to Action
Credit unions need to offer the “right experiences at the right times to fulfill important life needs,” CO-OP noted. That sounds great, but where to start, you may be wondering. CO-OP’s Samantha Paxson said the research uncovered three calls to action, including:
- Lifestyle enablement, which means looking at members in a whole new way. This is about combining demographics with needs to create lifestyle banking. “By leading with lifestyle, we uncover greater diversity in needs and opportunities to provide members with cohesive experiences,” observed Paxson.
- Think about the “Path to Primary.” This is about moving beyond passive relationships to active relationships, said Paxson. (You know, the waiting for the member to walk in or go online and use a product and service.) Paxson said this about moving from infrequent interactions with members to owning every financial moment of every day (a lot of this has to do with payments, including contactless, P2P, mobile wallets, and more).
- Having more relevant personal relationships. This includes offering all of these services and experiences in a digital environment and in the ways that make fintechs so relevant, Paxson explained. “Fintech providers have really understood this and understood the end-consumer and how to design for them,” she added.
A Concerning PFR Number
CO-OP is by no means alone in offering resources to credit unions. Filene, the trade groups, the card processors and more all have reams of data and information, experiences and findings, to share.
If you’re still not sold or unsure just how digitally divided your credit union may be, CO-OP shared research showing just 24% of members think of their credit union as their primary financial relationship, aka PFR. “You could drive big increases without ever adding another member,” Clark observed during the THINK event.
And if you’re thinking to yourself right now, “Frank, this doesn’t really apply to us. We’re not a product and service shop, we lead with rate,” well… First, that’s expensive. Second, if the member joined for rate, they will leave you behind for a better rate elsewhere. And third, EY’s Nikhil Lele pointed out during the webinar that the research found what consumers valued most wasn’t rate driven. “It’s about meeting other needs,” he said.
No Need to Go It Alone
By this point there may be more than a few of you at small and midsize CUs thinking all of this think-about-the-big-picture stuff always sounds so good, but your brain is still stuck back at the digital divide related to your very limited budget. You’re right, you can’t go it alone. But that’s why CUSOs were invented. As Clark observed, “We think CO-OP’s value is in investing at scale and doing things that empower you to fend this off and also get out there and lead.”
The same is true for so many other CUSOs. Like all the other resources available, CUSOs should be leveraged as much as possible so you can get out there and lead.
There isn’t a credit union in the country that can’t do something about this digital divide, regardless of assets. Make time to think about, ponder and debate the future and how your CU plans to get there. It won’t be with products and services, but with experiences. The fintechs have figured out what consumers want, or they wouldn’t be in business. As Clark said, they are eating you piece by piece, and if you’re a small or midsize CU, you don’t have all that many pieces.
A Trendline Worth Your Attention
If you are somehow still in doubt (or denial) about what’s going on, consider this trendline that should have every credit union thinking. Two years ago, when EY and CO-OP surveyed members and consumers, just 6% named a fintech as their PFR. In the most recent survey, more than 30% did so, a figure that rose to more than 40% for those under age 40.
The greatest risk to every small and midsize credit union has never been the small assets, it’s small and midsize thinking. By making time to think big, to think in new ways, you can bridge the most important digital divide of all. Get going and start building fires instead of putting them out.
Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of the new book, ‘501 Name Tags: Everything You Need to Know About Business Can be Learned at a Conference & Forgotten in the Trade Show.” For info: www.501nametags.com.